Pty Ltd Company

Directors bear the responsibility of ensuring the company complies with all obligations under corporations law. This includes maintaining accurate financial records, practicing sound governance, notifying ASIC of pertinent company changes, and paying ASIC fees.

Pty Ltd Companies must file an annual tax return, with no initial tax free threshold. They are normally taxed at a fixed rate of 25% from their first dollar of taxable income (income less expenses) earned.

However, profits distributed as dividends to shareholders are taxed according to individual tax rates, with any franking credits applied.

Unlike sole traders and partnerships, company losses cannot be offset against personal income.

In cases where a company’s income primarily derives from an individual’s efforts or expertise, it may be treated as individual income for tax purposes under the PSI rules.

See our Company Tax article for more details on company tax.

Registering a company involves an ASIC establishment fee, along with potential professional service fees if legal or accounting assistance is sought.

Additionally, an annual ASIC levy applies, and ongoing accounting expenses are incurred to maintain proper company accounts.

Your Pty Ltd company must have at least one director who is an Australian resident, at least 18 years old, not insolvent, and not barred from corporate management. You also need to decide on the company’s shareholders, who can be individuals or other companies, both Australian and foreign.

You can register your Pty Ltd Company with ASIC by engaging the services of an accountant, lawyer or an registered ASIC agent. Provide details like the company name, director(s), shareholder(s), and the registered office address.

In Australia, a company can operate under one of three governance frameworks:

• Company Constitution: This is a document that lays out the rules governing the company’s activities, relationships between its directors and shareholders, and various governance procedures. It typically covers aspects like the conduct of meetings, whether they are board meetings or members’ meetings, and other procedural matters.
• Replaceable Rules: In the absence of a company constitution, a company can rely on replaceable rules provided by the Corporations Act. These rules serve as a fundamental set of guidelines for managing a company’s affairs, covering essential aspects of corporate governance.
• Combination of Both: Some companies may choose to adopt a combination of their own constitution and the replaceable rules to govern their operations, depending on their specific needs and preferences.

These governance frameworks help companies establish clear rules and procedures for their functioning, ensuring transparency and accountability in their operations.

After company registration, apply for an Australian Business Number (ABN) through the Australian Business Register (ABR). This unique 11 digit number identifies your company for business purposes. It’s essential for invoicing, GST credits, and tax compliance.

ASIC will automatically allocate an ACN to a newly registered company. An ABN is usually comprised of the 9 digits of the ACN plus an extra 2 digits.

For the the differences between an ABN and an ACN, see our ACN vs ABN article.

If your annual business turnover is expected to exceed $75,000, you must register for Goods and Services Tax (GST), typically 10% of goods and services provided in Australia.

Separate your personal and business finances by opening a dedicated company business bank account. This allows you to manage company finances, track expenses, and fulfill tax obligations.

To maintain transparency and accountability, Pty Ltd companies must submit annual financial reports to the ASIC. These reports comprise financial statements that provide a snapshot of the company’s financial health, directors’ reports outlining the company’s performance and prospects, and auditor’s reports confirming the accuracy of the financial statements.

Any significant changes within the company, such as alterations to its registered office address, directors, or shareholders, must be promptly reported to ASIC to keep its records up to date.

Pty Ltd companies must fulfill their tax obligations, which include registering for an ABN and GST if applicable.

These companies must keep proper accounting records to accurately track income, expenses, and other financial transactions. This information is essential for preparing and submitting tax returns to the tax officials.

Compliance with tax regulations is critical, as failure to meet tax obligations can result in penalties and legal consequences.

Pty Ltd companies are required to maintain a register of shareholders, which includes detailed information about each shareholder, such as their names, addresses, and shareholdings. This register serves as an official record of ownership and is crucial for communication and decision making.

Shareholders must be provided with share certificates as evidence of their ownership in the company. These certificates specify the number and class of shares held by each shareholder.

Regular updates on the company’s activities, financial performance, and strategic plans should be communicated to shareholders to ensure transparency and informed decision making.

Directors of Pty Ltd companies have a fiduciary duty to act in the best interests of the company. This involves making decisions that prioritize the welfare of the company and its shareholders.

Directors must exercise care, diligence, and honesty in carrying out their roles. They should actively engage in the company’s affairs, participate in board meetings, and stay informed about its operations.

Avoiding conflicts of interest is paramount for directors to prevent situations where their personal interests may conflict with the company’s interests. If conflicts arise, they should be disclosed and managed transparently.

Pty Ltd companies must annually renew their registrations with ASIC to maintain their legal status. This renewal process involves paying the necessary fees and updating any relevant company information.

Failing to renew registration in a timely manner can result in the company losing its legal status and facing potential penalties. Therefore, it is essential to keep track of renewal deadlines and comply with ASIC’s requirements.

• Ltd simply means ‘limited’ and signifies limited liability for shareholders or members
• These companies, including those limited by guarantee, are public companies, implying some public ownership.
• ASIC mandates that limited companies file annual accounts.
• Public companies must have at least three directors and can have numerous shareholders.
• Unlike proprietary companies, public companies may list their shares on the Australian Stock Exchange (ASX).